REMARKS 


UPON    THE 


NECESSITY  AND  EFFECT 


OF    A 


General  Bankrupt  Ifi 


INCLUDING  CORPORATIONS, 


UCSB   LIBRARY 


REMARKS 


UPON  THE 


NECESSITY  AND  EFFECT 


dnural  Bankrupt 


INCLUDING  CORPORATIONS. 


PEEFACE. 


TO      THE      READER. 

The  movement  of  the  Senator  from  Georgia,  (Senator 
Toombs,)  in  the  United  States  Senate,  in  reference  to  a  general 
bankrupt  law,  has  created  much  excitement  already  in  the 
country,  and  is  likely  to  produce  more  as  it  progresses.  There 
can  be  no  doubt  that  a  large  majority,  at  the  present  time,  is 
decidedly  in  favor  of  action  in  the  premises,  and  that  Congress 
would  be  much  more  profitably  engaged  in  legislating  on  the 
subject,  than  in  filibustering  about  bleeding  Kansas  and  the 
Lecompton  Constitution.  The  author  begs  leave  to  submit 
some  hastily  written  views  upon  this  subject  to  the  reader,  and 
if  his  efforts  have  the  effect,  to  any  extent,  however  small,  to 
call  the  attention  of  the  country,  and  the  members  of  Con- 
gress, to  the  great  necessity  of  proper  and  wise  legislation  on 
the  subject  of  bankruptcy,  his  purpose  will  be  accomplished. 

And  if  the  able  Senator  from  Georgia  succeeds  in  bringing 
up  the  question,  and  procuring  the  passage  of  a  proper  law,  he 
will  be  entitled  to  the  lasting  gratitude  of  the  present  and  future 

generations. 

THE  AUTHOR. 

NEW  YORK,  March  20,  1858. 


General  §attluit)rt 


REMARKS  UPON  THE  NECESSITY  AND  EFFECT  OF 
SUCH  A  LAW,  TO  INCLUDE  CORPORATIONS. 


In  all  civilized  countries,  where  trade,  exchange,  commerce,  and 
manufactures  have  been  carried  on  to  any  extent,  some  form  of  bank- 
ruptcy has  been  considered  necessary,  and  has  been  adopted.  In 
England  the  law,  from  time  to  time,  has  undergone  changes,  but  has 
always  been  retained  in  some  form ;  and  even  in  this  country  the  dif- 
ferent States  have  found  it  necessary  to  adopt  for  their  own  citizens 
some  form  of  an  insolvent  or  bankrupt  law,  and  the  wise  framers  of 
our  constitution  reserve  therein  the  expressed  right  for  the  general 
government  to  enact  a  general  bankrupt  law ;  and  twice  since  the 
adoption  of  the  constitution,  Congress  has  found  it  necessary,  grow- 
ing out  of  an  uncommon  financial  disaster,  to  pass  a  temporary  relief 
law,  which  was  called  a  bankrupt  law  ;  but  they  were  so  limited  in 
their  operation,  that  they  were  not  only  repealed,  but  prejudiced  the 
country  against  any  law  of  the  kind.  The  past  year  the  country  has 
been  called  upon,  for  some  cause  of  which  I  shall  speak  hereafter, 
to  pass  through  one  of  those  frequently  occurring  crises  in  trade, 
which  destroy  confidence,  annihilate  credit,  and  carry  with  them  more 
or  less,  in  proportion  to  their  severity,  personal  and  social  ruin.  Such 
a  state  of  things  again  has  awoke  the  thinking  classes,  not  only  as  to 
the  cause,  but  as  to  the  remedy. 

The  causes  of  these  inflations  of  credit,  and  subsequent  depressions, 
have  been  the  subject  of  much  discussion,  and  have  been  attributed 
to  almost  every  thing : — bank  expansions  and  contractions,  an  unset- 
tled state  of  the  currency,  extravagance,  overtrading,  doing  business 
on  borrowed  capital,  railroads,  and  many  other  things ;  but  it  is  evi- 
dent that  no  one  thing  can  strictly  be  named  as  the  cause.  Under 
our  system  of  government,  trade  and  commerce,  as  it  has  been,  and 
is,  undoubtedly  j  all  these  things  conspire  to  produce  the  result.  It  is 


true,  however,  that  periodically  these  terrible  disasters  come  upon  the 
country,  which  rack  the  foundations  of  trade,  commerce,  manufac- 
tures, and  society,  to  the  very  centre,  and  if  there  is  any  way  to  pre- 
vent, or  even  to  ameliorate  them,  which  is  practicable,  it  should  be 
adopted. 

It  is  often  true,  when  a  disease  or  evil  is  produced  by  a  combina- 
tion of  causes,  some  one  remedy  will  cure  the  disease ;  and  equally 
true  that  sometimes  a  remedy,  applied  in  season,  will  prevent  it  alto- 
gether, or  render  it  so  light  as  to  be  of  little  injury. 

Undoubtedly  among  the  causes  that  produced  the  revulsion  we 
have  just  passed  through,  the  inflation  of  paper  currency,  and  the  ex- 
tensive operation  of  the  railroad  companies,  as  borrowers  in  the  money 
market,  have  had  a  marked  effect,  and  perhaps  have  been  prominent 
and  leading  causes ;  while  over-trading,  which  is  the  natural  result  of 
the  extravagance  of  the  people,  and  that,  to  a  certain  extent,  is  nour- 
ished by  the  readiness  with  which  a  representation  of  money  can  be 
obtained  from  banks,  when  all  is  "  easy,"  (as  the  Wall-street  brokers 
have  it,)  has  thrown  in  its  large  mite. 

Now,  what  can  be  done  by  the  country  to  prevent  or  mitigate  fur- 
ther calamities  of  this  kind?  And  is  there  any  thing  due  to  those 
persons  who  have  fallen  amid  the  general  crash7  These  questions 
are  important,  and  demand  a  thorough  and  dispassionate  considera- 
tion by  an  intelligent  people,  and  by  our  legislators,  who  are  but  the 
servants  of  the  people. 

That  Congress  has  the  power  to  pass  a  general  bankrupt  law,  there 
can  be  no  question.  It  is  not  left  by  the  Constitution  to  inference  or 
construction.  It  stands  out  in  bold  relief,  as  a  positive,  expressed 
power  reserved  to  the  Federal  Government.  After  the  passage  of 
the  law  of  1841,  (defective  as  that  was,)  it  being  sustained  and  en- 
forced by  all  the  courts  in  the  United  States,  the  question  of  the 
power  of  Congress,  even  to  include  contracts  made  prior  to  the  law, 
can  scarcely  be  questioned. 

The  Constitution  provides,  that  the  States  shall  not  make  any  law 
impairing  the  nature  and  obligations  of  contracts,  but  there  is  no  such 
provision  in  reference  to  Congress,  and  beyond  that  there  is  an  express 
provision  in  the  Constitution,  which  has  already  been  mentioned,  that 
Congress  may  pass  a  general  bankrupt  law,  and  this  gives  the  abso- 
lute constitutional  right  even  to  discharge  contracts  existing  before 
the  law  was  made. 

The  English  government  have  always  acknowledged  the  doctrine 
03  fundamental,  constitutional  law-— that  contracts  rnado,  and  acts 


done,  in  faith  of  the  then  existing  law,  should  not  be  violated  by  sub- 
sequent legislation  to  the  same  extent,  that  has  been  held  by  our 
courts  ;  and  from  time  to  time,  without  any  doubt  about  the  right, 
Parliament  has  made  and  altered  bankrupt  laws  affecting  existing 
contracts.  The  law  of  1841  was  passed,  approved,  and  sustained 
upon  the  principles  above  stated;  and  directly  and  indirectly  almost 
every  court  in  the  United  States,  including  both  District  and  Circuit 
Judges  of  the  United  States  Court,  and  the  Judges  of  the  State 
Courts,  sustained  the  law  as  constitutional.  Very  few,  if  any,  among 
the  legal  profession  will  be  found  at  the  present  time  to  doubt  the 
constitutionality  of  such  a  law,  and  discussion  of  the  question  would 
seem  unnecessary. 

The  passage  of  the  law  cannot  be  said  in  truth  to  be  in  violation  of 
an  acquired  right,  for  all  contracts  have  been  made  with  a  full  know- 
ledge, on  the  part  of  the  contracting  parties,  that  Congress  has  this 
right  reserved  in  the  Constitution,  and  that  the  law  may  be  made  and 
enforced  at  any  time. 

Will  such  a  law,  if  passed  by  Congress,  produce  the  desired  effect? 
Will  it  prevent  such  over-issues  and  inflations  of  banks?  Such  over- 
credits  to  railroad  corporations  ?  Such  over-trading,  and  such  heart- 
sickening  panics  as  we  have  lately  passed  through  ?  And  what  the 
law  should  be,  to  produce  such  a  result,  is  what  we  propose  to  discuss 
with  great  brevity. 

A  bankrupt  law,  to  be  permanent,  should  in  this  country  include  all 
persons  and  corporations.  It  is  true  that  in  England  it  has  been  sup- 
posed until  of  late  that  a  bankrupt  law  should  only  affect  traders,  and 
until  the  last  half  century  perhaps  this  has  been  true  ;  but  England 
has  changed  her  policy  on  this  subject.  This  country  has  always  been 
so  constituted,  that  each  portion  of  her  industry  has  been  to  a  great 
extent  dependent  upon  the  other,  and  when  the  agriculturist  becomes 
embarrassed,  that  embarrasses  the  retail  trader, his  embarrassment  af- 
fects the  jobber,  the  jobber's  inability  to  perform  affects  the  importer 
the  manufacturer,  and  commerce,  and  all  suffer  together,  even  the 
common  day  laborer;  therefore  bankruptcy,  either  as  remedial  or  a  re- 
lief law,  should  extend  to  all  classes. 

In  other  countries,  corporations  have  never  been  supposed  to  be 
entitled  to  any  privileges  or  immunities  above  individuals  :  but  on  the 
other  hand,  as  they  are  less  responsible,  and  have  scarcely  any  per- 
sonal obligations,  so  far  as  the  individuals  composing  them  are  con- 
cerned, they  are  not  considered  as  entitled  to  as  much  consideration. 


8 

In  reference  to  the  matter  of  being  compelled  to  pay  their  debts 
when  due,  or  wind  up  their  affairs  and  have  their  assets  distributed 
for  the  benefit  of  their  creditors,  they  certainly  should  be  held  to  as 
rigid  a  law  as  individuals,  aside  from  any  peculiar  reason  applicable 
to  banking  institutions.  The  different  classes  of  corporations  in  the 
United  States,  governed  as  they  are  by  State  laws,  in  different 
States,  furnish  strong  arguments  why  a  general  law  of  the  character 
of  which  I  am  writing  should  include  them. 

No  one  can  deny  that  the  difference  in  exchange  between  the  dif- 
ferent States  is  to  a  great  extent  created  by  the  banks  ;  that  the 
country  is  flooded  with  bank  bills  which  are  not  at  par  where  they  are 
sent  by  the  banks  issuing  them ;  that  a  great  effort  is  made  by  indi- 
vidual banks  to  get  their  bills  as  far  from  home  as  possible  ;  and  that 
the  more  indigent  classes  are  imposed  upon  by  being  compelled  to  re- 
ceive bank  bills  at  par  and  selling  them  at  a  discount.  Neither  will 
any  one  pretend  now  to  assert  that  the  ups  and  downs  of  the  circula- 
tion of  bank  bills  has  not  a  great  influence  in  creating  and  controlling 
the  business  of  the  country ;  that  when  the  banks  see  fit  to  refuse  dis- 
counts, or  to  lessen  the  amount  of  their  current  discounts,  a  paralysis 
in  business  to  some  extent  follows  ;  that  when  they  consider  them- 
selves safe,  and  for  that  reason  or  any  other  see  fit  to  extend  their 
line  of  discounts,  then  the  contrary  effect  is  produced.  Money  is  too 
abundant ;  property  assumes  a  value  it  does  not  actually  possess,  and 
every  thing  goes  up  and  becomes  inflated  only  to  have  its  reaction 
and  go  down  as  much  below  the  real  value  as  it  was  above,  and  with 
the  fall  to  carry  down  thousands,  who,  too 'credulous,  have  supposed 
that  the  bubble  would  never  break.  But  it  does  break,  and  they  break 
with  it. 

It  is  also  an  established  fact  that  more  than  once  since  the  forma- 
tion of  our  State  banking  system,  the  banks  have  assumed  the  control 
of  all  the  business  of  the  country  by  suspending  payments  at  their 
own  option,  and  thus  completely  deranged  its  business — whether 
for  good  or  evil,  is  of  little  consequence  to  my  argument ;  for  though 
once,  when  exercising  this  power,  its  exercise  may  have  proved  bene- 
ficial, it  is  a  power  too  mighty  to  be  entrusted  to  the  banking  insti- 
tutions of  the  country,  which  are  merely  soulless  corporations,  who 
have  instituted  the  bank  for  their  own  benefit,  having  no  interest  to 
serve  except  those  of  their  own  stockholders,  and  frequently  regard- 
less even  of  them;  and  especially  it  is  true,  that  this  great  power  for 
good  or  evil  should  not  be  permitted  to  remain  in  the  hands  of  the 


9 

banking  institutions,  for  the  banks  themselves  in  the  different  States 
cannot  control  their  own  action  at  any  time,  as  experience  of  last 
year  shows.  If  five  or  six  presidents  of  banks  in  Wall  street,  New 
York,  meet,  and  in  their  wisdom  or  ignorance  decide  that  it  is  best 
to  suspend  specie  payments,  and  do  so,  every  other  bank  throughout 
the  States  must  from  necessity  follow  as  soon  as  the  telegraph  can 
convey  the  news  to  them  of  the  action  of  the  wise  men  of  Wall  street ; 
and  thus  the  power  is  narrowed  down  to  a  few  bank  officers  in  New 
York,  and  they  no  doubt  frequently  influenced  and  controlled  by  the 
frauds  or  unsoundness  of  their  own  institutions,  and  the  whole  circu- 
lating medium  of  the  country  is  left  to  the  dictation  of  a  few  men, 
with  a  power  more  dangerous  than  the  power  of  the  Emperor  of  Rus- 
sia, and  more  liable  to  be  exercised  for  other  purposes  than  the  pub- 
lic good. 

A  well  considered  bankrupt  law,  which  shall  make  the  non-pay  men  t 
of  the  banks  an  act  of  bankruptcy,  and  compel  them  at  once  to  cease 
operations,  and  have  their  affairs  closed  up,  will  effectually,: prevent 
any  recurrence  of  a  suspension  of  specie  payments.  It  will  do  much 
more  than  that.  It  will  admonish  the  banks  of  the  necessity  of  doing 
their  business  in  such  a  safe  and  prudent  way  as  not  to  subject  them- 
selves to  the  danger  of  being  compelled  to  suspend;  and  will  thus  give 
the  whole  country  a  circulation  of  bank  bills  which  will  be  represen- 
tative of  specie,  and  not  of  a  dangerous  inflated  credit,  and  the  bank 
bills  of  Georgia  or  Wisconsin  will  be  as  valuable  in  New  York  as  in 
the  State  in  which  they  are  issued,  except  perhaps  the  time  taken  for 
transportation.  The  great  loss  now  resulting  from  exchanges  will 
cease,  and  finally  panic  and  ruin  will  no  longer  periodically  come  upon 
the  whole  country  by  over  issues  and  final  suspension  of  irresponsible 
or  fraudulent  banks.  Many  other  substantial  reasons  might  be  urged 
why  banks  should  be  included  in  the  law,  for  they  are  truly  "  as 
plenty  as  black  berries  ;"  but  enough  has  been  said  in  the  judgment  of 
the  writer  to  satisfy  any  person  who  has  no  personal  interest  to  serve. 

The  effect  of  such  a  law  upon  railroads,  manufacturing,  mining  and 
other  corporations,  although  perhaps  not  of  as  much  interest  to  the 
whole  country,  will  be  very  important.  Railroad  corporations  which 
are,  and  for  a  long  time  have  been,  entirely  unable  to  pay  their  debts 
by  means  of  large  loans,  unearned  dividends,  &c.,  have  kept  up  a 
certain  amount  of  credit  in  the  market,  and  their  stock,  worthless  as 
it  actually  is,  is  frequently  sold  for  the  purpose  of  investment  to 
widows  and  orphans,  and  the  little  income  thus  pretended  to  be  per- 


10 

manently  secured  to  them  is  sunk  and  lost,  leaving  them  without  the 
means  of  support. 

Railroad  corporations  have  done  their  share  towards  producing  our 
late  commercial  revulsions.  They  have  dragooned  the  public  into 
building  parallel  lines,  and  have  been  the  largest  borrowers  in  the 
market,  at  any  rate  of  interest  at  which  they  could  obtain  the  money, 
even  when  the  officials  knew  that  the  only  mode  of  payment  was  new 
loans,  or  money  earned,  which  no  reasonable  man  could  expect  would 
be  earned  by  the  road.  Undoubtedly  many  roads  have  been  built 
upon  credit,  because  the  building  of  roads  is  more  profitable  than  run- 
ning them. 

These  roads  have  cost  some  hundreds  of  millions  of  dollars,  and  are 
to-day  worth  much  less  than  they  cost ;  they  have  now  a  large  float- 
ing debt  which  they  cannot  pay,  and  it  may  be  deemed  expedient  for 
Congress,  should  they  consider  this  subject,  to  give  them  some  time 
to  arrange  this  floating  debt  before  the  law  acts  upon  them.  Yet 
every  reason  exUts  why  railroads,  if  actually  insolvent,  should  at  once 
pass  into  solvent  hands  and  render  dealing  with  them  more  safe,  and 
take  away  their  ability  to  defraud  the  community  by  their  stocks. 

If  it  was  only  the  bulls  and  bears  in  Wall  street  that  suffered  by 
them  it  might  not  be  a  subject  of  much  consequence  to  the  public  ; 
but  such  is  not  the  case.  The  great  Wall  street  movement  is  to  catch 
innocent  outsiders,  who  do  not  know  the  ropes,  and  many  who  are 
thus  deluded  lose  all  they  have. 

As  it  respects  mining  corporations,  a  large  portion  of  them,  as  ex- 
perience shows,  are  insolvent,  if  not  fraudulent,  from  the  commence- 
ment, and  a  proper  bankrupt  law  would  weed  out  such  irresponsible 
concerns,  and  leave  only  those  that  are  actually  sound  and  healthy. 
This  class  of  corporations  have  also  been  the  cause  of  much  loss  and 
suffering,  and  a  future  like  the  past,  in  that  respect,  can  only  be  pre- 
vented by  a  healthy  bankrupt  law. 

As  it  respects  other  corporations,  perhaps  it  is  unnecessary  to  say 
more,  than  that  as  a  body  they  should  not  be  entitled  to  privileges 
above  individuals.  There  are  undoubtedly  large  numbers,  and  even 
classes  of  them  that  the  community  need  protection  against,  and  it  is 
sufficient  that  all  such  as  are  fit  to  exist  will  continue  and  thrive  un- 
der the  operation  of  the  law,  and  those  that  are  insolvent  and  fraud- 
ulent will  disappear. 

The  law  to  be  such,  as  will  prove  permanent,  should  not  be  a  mere 
relief  law,  like  that  of  1841,  as  has  already  been  suggested,  but  it, 


11 

should  be  substantially  an  involuntary  law,  not  alone  to  aid  parties 
who  have  failed,  but  to  a  certain  extent,  and  as  far  as  law  can  do  it, 
to  prevent  such  unwise  and  improvident  conduct  in  business,  as  to 
make  failures  and  loss  to  both  debtor  and  creditor  necessary.  Tho 
acts  which  shall  be  deemed  acts  of  bankruptcy,  should  be  clearly 
pointed  out  in  the  law,  and  when  committed  by  the  debtor  he  should 
at  once,  at  the  option  of  his  creditors,  or  either  of  them,  be  compelled 
to  surrender  all  his  effects  to  his  creditors,  and  an  equal  distrbiution 
without  preference  should  take  place.  It  may  be  urged  against  this 
view,  that  in  many  cases,  were  this  not  the  law,  parties  who  were  in- 
volved, would  struggl  along  and  perhaps  be  able  to  meet  their  liabilties 
and  save  themselves  and  their  creditors.  This  may,  in  a  few  cases, 
which  are  an  exception  to  the  general,  rule  be  true.  By  some  acci- 
dent, or  some  extraordinary  effort,  now  and  then,  a  party  or  corpora- 
tion who  are  actually  insolvent,  may  succeed  in  paying  their  liabili- 
ties and  becoming  finally  established  in  business.  The  ordinary  re- 
sult of  permitting  an  insolvent  to  go  on  with  business,  is  to  increase  the 
embarrassment  of  both  himself  and  his  creditors — to  create  new  debts 
that  he  can  never  pay,  and  frequently  to  involve  his  personal  friends 
who  lend  aid  to  help  a  hopeless  project,  and  both  bankrupt  and  cred- 
itor are  in  a  worse  condition,  when  he  is  finally  compelled  to  yield, 
than  they  would  have  been  bad  he  been  compelled  to  stop  when  he 
first  became  actually  insolvent.  Again,  iu  many  cases  the  struggles 
of  the  insolvent  to  recreate  a  solvent  position  leads  to  obtaining  goods 
by  false  and  fraudulent  pretenses,  and  to  the  sacrifice  of  his  nearest 
friends.  It  is  only  in  one  case  in  a  thousand  that  his  actual  assets, 
in  the  end,  approach  as  near  as  his  actual  liabilities  when  he  goes  on 
struggling  for  success,  after  actual  insolvency  exists,  as  when  he 
closes  up  his  business  in  the  outset. 

A  bankrupt  law  should  always  have  two  great  and  principal  objects 
In  view  :  the  faithful  distribution  of  the  property  of  the  debtor 
equally  among  his  creditors,  and  the  discharge  of  every  honest  debtor 
from  his  debts,  which  he  can  never  pay. 

Although  a  bankrupt  law  should  not  perhaps  be  made  merely  for 
the  temporary  purpose  of  relieving  parties  who  have  suffered  by  the 
late  financial  pressure,  yet  no  law  on  the  subject  would  be  complete 
without  a  voluntary  clause,  which  should,  under  proper  restrictions, 
give  every  person  the  power  to  put  himself  into  bankruptcy,  and  receive 
his  discharge,  if  he  complies  with  the  law. 

It  has  been  urged,  that  no  party  should  have  the  power  to  avail 


12 

himself  of  a  bankrupt  or  insolvent  law  by  his  own  mere  motion,  be- 
cause it  tends  to  fraudulent  bankruptcies.  Now  it  is  always  true, 
and  has  so  been  found  by  experience  in  England,  that  when  the  law 
is  entirely  involuntary,  the  debtor,  who  wishes  to  become  bankrupt, 
can  readily,  even  though  it  be  necessary  to  resort  to  fraud,  procure 
some  creditor  to  compel  his  bankruptcy,  and  then  he  is  in  the  same 
position  that  he  would  be  were  the  law  voluntary. 

The  present  state  of  things  in  the  United  States  furnishes  a  practi- 
cal argument,  not  only  for  an  involuntary,  but  for  a  voluntary  bank- 
rupt act.  In  this  couqtry,  the  people  who  are  born  rich  are  not  the 
class  who  produce,  manufacture,  or  trade.  Our  trade,  commerce,  and 
manufactures,  as  a  general  rule,  are  carried  on  by  the  industry  of  the 
middling  classes  of  society,  who  have  been  the  artificers  of  their  own 
fortunes ;  starting  as  clerks,  and  many  in  a  lower  capacity,  by  energy 
and  attention  to  business,  have  raised  themselves  to  the  position  they 
occupy. 

At  the  present  time,  thousands  upon  thousands  of  this  class  have 
been  swept  down  by  the  general  commercial  crash,  and  now  have  upon 
them  a  heavy  load  of  debt,  which  they  can  never  pay.'JThey  are  most 
of  them  young,  energetic  and  active  men,  with  families  to  sustain,  and 
children  to  educate.  Keeping  them  under  this  load  of  debt  will>  in 
some  cases,  drive  them  to  despondency  and  ruin ;  in  others,  compel 
them  to  linger  along,  without  the  aid  in  business  that  their  friends 
could  give  them,  were  they  relieved,  and  thus  the  country  will  lose 
thousands  of  active  men,  whose  business  qualifications  would  make 
them  valuable  members  of  society,  while,  at  the  same  time,  holding 
them  still  liable,  will  be  of  no  earthly  avail  to  their  creditors,  as  they 
never  can,  and  never  will  pay. 

The  writer  well  remembers  the  complaints  made  by  creditors,  under 
the  law  of  1841,  that  they  lost  so  much  under  the  bankrupt  law. 
This  was  a  mistake.  They  did  not  lose  by  the  law;  they  only  found 
out  what  they  had  lost  before,  and  were  saved  the  useless  trouble  of 
trying  to  collect  it,  while  the  debtor  was  saved  the  expense  and  an- 
noyance of  fruitless  suits,  which  otherwise  would  have  been  commen- 
ced to  compel  the  payment  of  the  debt. 

By  some  it  is  said  that  the  habit  of  men  in  business  is  to  release  all 
debtors  who  surrender  all  they  have,  and  that  this  voluntary  act  is 
better  than  bankruptcy.  The  difficulty  with  this  proposition  is,  that 
it  is  not  true  to  the  extent  which  is  claimed.  In  nearly  all  cases, 


13 

there  will  be  found  four  or  five  or  more  creditors,  who  will  not  release 
the  debtor  under  any  circumstances,  and  he  is  compelled  to  pay  these 
in  full  :  and  to  do  that,  he  must  cheat  those  creditors  who  are  liberal 
with  him,  or  obtain  the  means  from  his  friends  and  leave  it  still  a  debt 
upon  him. 

At  the  present  time,  the  question  of  a  general  law,  such  as  has  been 
discussed  above,  is  before  Congress,  and  will  undoubtedly  be  opposed 
by  such  banks  and  other  corporations  as  are  interested  in  its  defeat. 
But,  notwithstanding  the  opposition,  from  what  I  can  learn,  it  seems 
a  trial  is  to  be  made,  and  if  Congress  will  dispose  of  Kansas,  and  leg- 
islate a  little  for  the  necessities  of  the  country  and  its  constituents, 
and  give  us,  for  a  few  years,  the  trial  of  such  a  law,  it  will,  for 
once  at  least,  be  entitled  to  the  gratitude  of  the  nation. 


APPENDIX. 


The  following  is  a  copy  of  a  letter  received  by  Senator  Toombs, 
signed  by  the  representatives  of  some  fifty  thousand  persons  interested 
in  the  measur3,  which  the  Senator  has  kindly  permitted  the  author  to 
copy  : 

To  SENATOR,  TOOMBS,  OF  GEORGIA: 

DEAR  SIR  :  Having  introduced  a  resolution  into  the  Senate  of  the 
United  States  in  reference  to  that  portion  of  the  President's  annual 
message  which  refers  to  a  general  bankrupt  law,  and  having,  as  we 
learn  from  the  public  prints,  to  some  extent  taken  charge  of  that 
measure  in  the  Senate,  we  of  the  Northern  and  Middle  States,  who 
are  interested  in  this  matter,  take  the  liberty  to  address  you,  sir,  and 
to  suggest  some  notions  which  have  impressed  us  in  relation  to  this 
topic.  It  is  undoubtedly  true,  sir,  that  all  governments  which  have 
any  commercial  transactions  must  be  regulated  by  some  general  bank- 
rupt law;  and,  without  such,  that  their  commercial  business  must 
constantly  be  disturbed.  This  necessity  has  been  admitted  in  all  the 
leading  countries  of  Europe,  as  well  as  by  the  framers  of  the  Consti- 
tution of  the  United  States,  when  they  especially  provided  that  Con- 
gress should  have  authority  to  pass  a  general  bankrupt  law  for  all  the 


14 

States.  This  express  right  in  the  Constitution,  Congress  has  never 
attempted  to  enforce,  except  upon  two  occasions ;  and  in  each  case 
the  law  framed  was  the  offspring  of  a  present  panic — but  little  con- 
sidered, hastily  prepared,  and  made  rather  for  momentary  relief  than 
as  a  permanent  law  for  the  benefit  of  the  whole  community,  as  was  in- 
tended by  the  framers  of  the  Constitution.  These  laws,  so  imperfectly 
and  hastily  prepared,  met  with  much  opposition,  were  inferior  in  their 
character,  and  they  were  soon  repealed.  They  answered,  indeed,  for 
the  time,  the  purpose  intended — to  relieve  that  class  of  men  who  had 
become  bankrupt  by  the  fortunes  of  trade ;  but  they  did  not  answer 
the  general  purpose  intended  by  the  framers  of  the  Constitution,  or 
the  necessity  of  the  case. 

We  do  not  suppose  that  we  can  instruct  one  so  learned  and  so 
familiar  with  this  subject  as  yourself;  but  you  will  undoubtedly,  from 
your  known  character,  receive  any  suggestions  from  us,  however 
humble  they  may  be,  in  reference  to  this  subject,  in  the  spirit  in 
which  they  are  submitted. 

We  think  that  a  bankrupt  law,  to  carry  out  the  intentions  of  the 
Constitution,  should  be  permanent,  and  so  carefully  drawn  as  to  make 
its  operation  effectual,  certain,  speedy,  inexpensive,  and  sure  to  pro- 
duce the  desired  result. 

In  the  first  place,  in  our  judgment,  the  law  should  be  substantially 
an  involuntary  law.  Its  main  object  should  be  the  protection  of 
credit,  compelling  of  the  payment  of  just  debts  in  cases  of  bankruptcy, 
the  working  of  an  equal  division  of  the  property  among  all  the  cred- 
itors of  the  bankrupt  without  preference,  and  the  prevention  of 
fraud — and  thereby  the  prevention  of  extravagance  and  overtrading. 
It  should  also  include  corporations,  especially  banks  ;  and  we  believe 
that  banks — having  more  to  do  with  the  circulating  medium  of  the 
country,  more  to  do  with  the  commercial  interests  of  the  country, 
more  to  do  with  the  success  of  trade  in  the  country,  than  individu- 
als— should  be  more  especially  subject  to  the  care  and  operations  of 
such  a  law.  Upon  this  subject  some  doubt  will  unquestionably  be 
expressed,  and  perhaps  opposition  raised  by  interested  parties  to  the 
measure  proposed.  But  the  great  principle  of  exempting  banks  and 
banking  institutions,  chartered  by  the  States,  from  the  provisions  and 
vigilance  of  a  general  law,  is  dangerous  to  the  community  and  dan- 
gerous to  trade.  Their  operations  must  be  reached  and  governed  by 
some  substantial  and  general  law  of  the  United  States,  which  shall 
protect  the  citizens  of  every  State  against  the  wild  banking  opera- 


15 

tions  of  their  neighbors.  We  may  have  no  objection  to  banks  char- 
tered by  the  States ;  perhaps  none  to  the  issue  and  use  of  paper 
money.  It  is  convenient  and  perhaps  beneficial ;  but  we  do  object  to 
paper  money  being  the  representative  of  credit,  and  not  the  represen- 
tative of  actual  specie.  The  United  States  have  the  express  right, 
by  the  Constitution,  to  compel  banks  to  pay  their  debts  or  become 
bankrupt ;  and  we  believe  that  such  a  course — the  execution  of  a 
law  embracing  such  principles — will  result  in  making  paper  currency 
the  representative  of  specie  rather  than  the  representative  of  an  in- 
flated credit.  The  United  States  may  have  no  authority,  (and  if  they 
have  it,  it  might  be  unwise  at  the  present  day  to  exercise  it,)  to  in- 
terfere with  the  charters  of  State  banks,  or  to  interfere  in  any  way 
with  the  right  of  the  States  to  make  such  laws  and  regulations  as  they 
may  please  in  reference  to  their  banking  institutions,  except  so  far  as 
the  great  principle  of  payment  or  bankruptcy  is  concerned.  That  was 
intended  by  the  Constitution  to  be  governed  by  Congress.  It  should 
be  so,  and  when  it  is,  we  respectfully  submit  that  we  shall  have  com- 
paratively li  tie  more  wild  overtrading  and  extravagant  inflation  re- 
sulting in  panics,  commercial  ruin,  and  distress,  such  as  we  have  had 
for  the  last  year. 

Secondly.  The  law  should  contain  an  involuntary  clause.  At  the 
present  time  we  are  living  under  the  shadow  of  a  great  commercial 
revolution,  causod,  in  our  judgment,  principally  by  the  want  of  just 
such  a  law  as  you  recommend.  The  result  of  this  revolution  has 
been  to  involve  a  large  portion  of  the  trading  and  mercantile  commu- 
nity in  absolute  ruin.  Among  them  are  thousands  of  honest,  indus- 
trious, intelligent,  and  energetic  men,  whose  lives  have  been  devoted 
to  trade — some  of  whom  started  with  a  competency,  and  others  making 
their  way  up  from  clerkships  and  subordinate  positions  by  their  own 
industry — who  are  now  left  with  heavy  commercial  debts  upon  them, 
which  they  are  unable  to  pay,  and  which  will  continue  to  oppress 
them  and  prevent  their  future  usefulness,  unless  some  relief  shall  be 
afforded.  And  we  respectfully  submit,  that  it  is  much  better  for  the 
country  that  these  men,  many  of  them  young,  should  be  set  at  liberty, 
to  again  become  active  members  of  society  and  of  the  trading  commu- 
nity, than  that  they  should  be  suffered  to  sink  down,  helpless  and  des- 
pondent, with  their  families,  under  a  heavy  load  of  debt  which  is  de- 
structive to  them  and  never  will  be  of  any  use  to  their  creditors, 
They,  like  all  other  bankrupts,  should  be  discharged  from  their  lia- 
bilities by  the  operation  of  law,  if  they  have  been  honest  and  have 


LIBKAKK 


16 

freely  surrendered  all  their  goods  to  be  equally  divided  among  their 
creditors. 

Thirdly.  This  law,  sir,  in  our  judgment,  should  guard  with  care 
against  all  preferences,  and  with  greater  care  against  all  fraudulent 
transactions  upon  the  part  of  the  bankrupt ;  and  fraud  should  be  ren- 
dered, in  its  operation,  as  nearly  impossible  as  law  can  make  it.  In 
its  details  it  should  be  drawn  with  that  care  that  will  render  it  cer- 
tain in  its  operation — not  retaining  the  assets  of  the  debtor  in  the 
hands  of  the  court  or  the  assignees,  instead  of  putting  them  into  the 
pockets  of  the  creditors,  for  such  a  length  of  time  as  to  render  final 
payment  of  little  consequence  :  and  not  subjecting  the  debtor  himself 
to  a  long,  tedious,  and  harrassing  process,  by  which  what  means  he 
may  be  able  to  obtain  shall  be  used  up,  and  his  final  discharge  ren- 
dered of  no  substantial  advantage  to  him. 

These  views,  sir,  we  beg  leave  to  submit.  They  are  general  in  their 
nature,  but  we  fully  believe  that  they  are  the  views  of  a  large  major- 
ity, both  of  the  solvent  and  insolvent  portion  of  the  community.  We 
further  believe  that,  if  they  are  substantially  embodied  in  a  law  which 
shall  be  passed  by  the  present  Congress,  they  will — 

1st — Afford  relief  to  a  large  class  of  suffering  and  honest  debtors. 

2d — They  will  cause  an  equal  and  just  distribution  of  the  property 
of  debtors,  who  have  failed  during  the  late  panic. 

3d — By  including  banks  in  the  operation  of  such  a  law,  overissues 
and  extravagant  speculations  will  be  restrained,  and  a  firm,  uniform 
system  of  currency  throughout  the  United  States  indirectly  established 
— which  will  render  overtrading  and  careless  and  dangerous  specula- 
tions less  frequent,  and  panics  such  as  we  have  lately  passed  through 
impossible. 

Finally,  when  this  law  comes  to  be  executed  in  future,  instead  of 
having,  as  we  now  have,  as  many  insolvent  or  bankrupt  laws  as  there 
are  States — different  in  their  principles,  different  in  their  action,  and 
ineffective  as  between  citizens  of  the  different  States — we  shall  have 
what  was  intended  by  the  framers  of  the  Constitution,  a  perfect  law 
for  the  whole  United  States,  for  the  protection  of  the  creditor  or 
debtor,  and  for  the  protection  of  the  currency  of  the  United  States. 

All  of  which  is  respectfully  submitted. 


